New Car Insurance Grace Period

So you’ve decided to purchase a new car and realized you need insurance to complete the transaction.  There are a few things to consider when purchasing an insurance policy for your new ride before you drive it off the lot.

First off, do you already have an insurance policy? Second, are you paying cash or financing the vehicle through a lender, such as a bank, credit union or perhaps a leasing company?

If you already have an insurance policy the process can be pretty simple, but there are two important issues regarding insurance coverage for a new car.

Replacing or Adding a Vehicle?

The first is whether you are simply replacing your current vehicle with a new one (including leased vehicles) or adding an additional vehicle to your policy.


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If you’re simply replacing an older car with a new replacement vehicle, you should be automatically covered for a certain amount of time, perhaps a week or two, and the coverage should be the same as what you had on the old car.

While grace periods may differ by state or insurer, you may have between 7-14 days or more to notify the insurer of the change.

The insurer acts on the assumption that you didn’t trade in a Yugo for a Lamborghini, so they’re comfortable giving you some time to notify them about it.

If your new car is an additional vehicle to the one (or more) already listed on your insurance policy, you are typically automatically covered for slightly less time than you would be if it were a replacement vehicle (if at all).

Of course, your insurance company will want to know about the additional vehicle(s), because it means they’ll have more exposure to potentially paying insurance claims and will likely increase your insurance premium.

Know How You’re Automatically Covered

The second issue pertains to the difference between liability and physical damage coverage.

It’s important to note the distinction between liability-only insurance and physical damage coverage as it relates to the purchase of a new car.

Liability is automatically covered on a new vehicle in the situation discussed above. Physical damage coverage, on the other hand, has some limitations.

If you don’t already have physical damage coverage (perhaps you had an older car you didn’t mind getting banged up), your vehicle may be covered automatically for a few days.

If you already have physical damage coverage, your vehicle will be covered equal to the highest amount of coverage on your current policy.

Check with your agent or insurer to verify the amount of coverage before driving off the lot. There will be an automatic deductible assigned to the policy if this is the case.

As always, be sure to gather online insurance quotes to make sure you’re getting the best coverage at the lowest possible rate.

Tip: It is highly recommended that you contact your insurance agent or insurer prior to purchasing a new vehicle. Every insurer and state has different rules regarding what they find acceptable. You certainly don’t want to end up uninsured…even for 10 minutes.

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2 Comments

  1. Ivy August 24, 2016 at 1:42 pm -

    hello, i’m buying a used car from a private owner, is there a “grace Period” for obtaining insurance after purchasing a car? So, after I purchase it do I have a certain amount of time to get the vehicle insured? Or does it have to be done immediately?

  2. Hal Roquemore October 10, 2017 at 8:54 am -

    I leased a new car on August 25th and left the dealership after 6:00pm est. On September the 14th, I had a wreck. My policy says that my extended coverage last for 14 days. Insurance offices aren’t open on Friday and Saturdays not Labor Day which was during this time as well. If you count “Business Days” from date of new lease to date of accident when I notified insurer, it was 14 days. The damage to the car totals over $25,000 and State Farm is not going to cover it because they say I didn’t notify them. Note: I’ve had auto insurance with them for 23 years and all of my family is insured by State Farm. Fortunately BMW includes GAP insurance in their leases but I don’t know if this will help any. According to BMW, “if all air bags deploy on our automobiles, it will be considered Totaled”. The negotiated cost of the car was $41,000. My total lease payments for three years total $21,000. If the damages are $25,000 and the lease payments are less ($21,000), what should I do? Do I have any options here? Will BMW GAP insurance help me any out all? Is there any value to damage laws? If the dealership needed to verify insurance because I’m driving their car, why wouldn’t they call State Farm and notify them as well? It’s not worth retaining an attorney due to the cost exposure I’m subjected to already so I’m hoping there is help somewhere.

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